Personal bankruptcy can affect one’s life in a variety of ways. It can have both negative and positive effects. All of these factors should be anticipated when one is considering this decision.
Of course, there is a great financial impact on filing bankruptcy. It can be positive in that massive debts can suddenly be erased. A lot of people who file for bankruptcy are in a hole out of which they could never extract themselves. Bankruptcy gives them a way to do just that. They can start over financially and watch their assets start to actually grow.
You may also lose some assets when filing for bankruptcy. Depending on the exemptions for which you are entitled, you may have to give up assets so that they can be liquidated and used to repay creditors.
An major effect of bankruptcy is on credit. Those who file bankruptcy will have a mar on their credit for years to come. It will be very difficult to get approved for new credit. It may be difficult to get a credit card, thus you may need to make purchases with cash or with a debit card.
You may have trouble getting approved for a loan. Getting a mortgage may be very difficult with a recent bankruptcy. Even getting approved for a car loan or a loan for something smaller such as furniture, electronics or jewelry may be a challenge. If you do get approved for loans, then you will be considered high risk thus your terms may be very unfavorable. Your interest rate and payment plan might be high.
Your credit may even come into play in other areas of your life. For instance, some employers actually pull the credit reports of potential employees. Thus this can even affect your ability to get a new job.
A bankruptcy can affect a person emotionally. Some will find it to be a positive experience, some will find it to be a negative one and yet others will find it to be a little bit of both. The positive aspect is that you can have a way to turn your life around. Those who file bankruptcy may have a plethora of creditors calling and hounding them for money. Suddenly they can all be gone.
Feelings of guilt and sadness are also common with a bankruptcy. Few believe they will ever get to this point in life, and it can come as quite a shock. They may feel like they failed or should have done something to avoid it. Obviously there is nothing that can be done now except to start anew and avoid it in the future.
Bankruptcy can have a major effect on a person’s life. This will occur for years to come, so it is important to understand the potential impact it can have on your financial and personal life. Try to prepare yourself as much as possible to create a smooth and positive transition.
Resources:
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre41.shtm
http://filepersonalbankruptcy.org/how-to-determine-if-its-time-to-file-personal-bankruptcy/#more-203
http://www.allbusiness.com/personal-finance/2452-1.html